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Ch. 3 Assessing Opportunities and Threats

Ch. 3 Assessing Opportunities and Threats. Marsha Swink Jonathan McLaurin Paul Shirley. External Analysis. What is External Analysis? Opportunities Threats. Open Systems-Two Perspectives. Environment as a source of Information Amount of change - dynamic vs. stable

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Ch. 3 Assessing Opportunities and Threats

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  1. Ch. 3Assessing Opportunities and Threats Marsha Swink Jonathan McLaurin Paul Shirley

  2. External Analysis • What is External Analysis? • Opportunities • Threats

  3. Open Systems-Two Perspectives • Environment as a source of Information • Amount of change- dynamic vs. stable • Amount of complexity- complex vs. simple • Environment as a source of Resources • Scarce and necessary resources • Hostile= greater uncertainty

  4. External Environmental Sectors • Specific Environment- Customers, competitors, suppliers and other competitive factors. • General Environment- Economic, Demographic, Sociocultural, Political-Legal, and Technological.

  5. Specific Environment • Porter’s Five-Forces Model • Rivalry • Entrants • Buyers • Suppliers • Substitutions

  6. Rivalry Among Existing Firms • Competitors- Few or Many? • Sales Growth- Slowing or Progressing • Diversity Among Competitors. • How similar is your competition to you?

  7. Potential Entrants to the Industry • Economies of Scale- High or Low? • Capital Requirements- Large or Small? • Government Policies- In Place to Help or Harm?

  8. Bargaining Power of Buyers • Purchases Large or Small Volumes? • Products Purchased are Standard or Unique? • Buyer’s Profits- High or Low?

  9. Bargaining Power of Suppliers • Are Suppliers Concentrated or Fragmented? • Importance of the Industry Being Supplied • Is our company important • Product is an Important Input to Industry.

  10. Substitute Products • Are There any Good Substitutes?

  11. Specific Environment • Industry Profitability • What does the company have to achieve profitability? • What can it develop or create to progress?

  12. General Environment • Includes: • Economic • Demographic • Sociocultural • Political-Legal • Technological • Trends positive(opportunity)/negative(threats) • Some Changes have no effect on organization

  13. Economic • Rising cost of energy and fuels • Retailers- consumers lose appetite of spending • Exception: Wal-Mart • CostCo’s greatest struggle • Macroeconomic data • Interest rates, GDP, Unemployment levels • Global Business analysis won’t change much • Biggest challenge is reliable statistics

  14. Demographics • Age • Gender • Income • Ethnicity • Education • Geographic Location • Employment • Birth Rates • Cross Examine • Understand current and potential customers • Hourglass Phenomenon Peace Baby Boomers Today

  15. Demographics • U.S. • 24.7 million small businesses • 24.6 million people married w/children • Avg Inc. $48,201 per person • CostCo • Small Businesses • Upper/Middle Class Families • Avg. Inc. Target Market • 100,000

  16. Sociocultural • Understand Current • Culture • Lifestyles • Kraft’s healthier food products • Traditions • Tastes • Attitudes • What’s “in” • Apple’s iPods/Phones/Pads

  17. CostCo’sSociocultural Forces • U.S • Shopping convenient, • Deliverer organic options • Awareness of food allergens • Canada • Many ethnic groups • Japan • Freshness • Portability

  18. Political-Legal • Taxation • Minimum wage • Product labeling/safety laws • International business • Trading

  19. Technological • Look For • Scientific Innovation • Technological Innovation • Most Affected • Product R&D • Organizational Work Processes • Computerization

  20. CostCo’s Technological Facts • Track purchases of members • Know which products sell more • Restocking inventory • Memberships connected w/credit cards

  21. Finding Info on External Environment • Customer surveys • Trade journals • General news • External informational systems • Problems • Too much information

  22. Responsibility for External Analysis • Small to Mid-size organizations • All should monitor changes • Large organizations • Managers • Everyone is involved

  23. What's the point? • Align the organization with the environment • Understand what the environment has to offer • Ever increasing dynamic environment • Makes a difference in performance results • Promotion and raises

  24. Challenges • Changes are too rapid to evaluate • Time consuming • Forecast aren't perfect

  25. Take Aways External Environment • Industry profitability • Stay in line with environment • Continually Assess opportunity and threats

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